For most of the post-war period, Europes capital markets remained largely closed to international capital flows. This
paper explores the costs of this policy. Using an event-study methodology, I examine the extent to which restrictions of
current and capital account convertibility affected stock returns. The delayed introduction of full currency convertibility
increased the cost of capital. Also, a string of measures designed to reduce capital mobility before the ultimate collapse
of the Bretton Woods System had considerable negative effects. These findings offer an explanation for the mounting
evidence suggesting that capital account liberalization facilitates growth.